FOIA Project Annotation: A federal court in Minnesota has told the SEC that it must respond to a series of requests filed by SEC Insight, which has effectively used FOIA to research publicly-held companies, now that the agency has closed its investigation of the companies involved and Exemption 7(A) (interference with law enforcement investigation or proceeding) no longer applies. But the court found that for requests where an investigation was still underway, the agency could provide a category-by-category explanation of the types of records involved. However, the court concluded that the agency would have to conduct a document-by-document review to substantiate the inclusion of records into the five categories established by the agency. After SEC Insight began using FOIA to spot companies that were running into trouble with the SEC, the agency began to frequently invoke a Glomar response to neither confirm nor deny the existence of records. SEC Insight noted that the agency had used a Glomar response three times in the decade prior to 2002, but invoked it 99 times in 2003 alone, with 66 of those being in response to requests from SEC Insight. Rejecting the company's request that he enjoin the SEC from using a Glomar response, District Court Judge Paul A. Magnuson noted that "future harm is merely speculative in nature, and injunctive relief is inappropriate." As to other requests for which the agency had initially invoked a Glomar response but had since claimed Exemption 7(A), Magnuson pointed out that "the issue now is whether the SEC is properly withholding documents under Exemption 7(A). From this record. . . the Court cannot conclude that SEC has satisfied its burden that it has properly withheld documents. Thus, both Plaintiff's and Defendant's Motions are denied on this point." The SEC tried to shift the burden onto SEC Insight by arguing that for requests where Exemption 7(A) no longer applied, the matter was now moot and the company should be required to resubmit its FOIA requests. Quoting from prior case law that "mootness occurs when requested documents have already been produced," Magnuson observed that "here, the SEC has not disclosed any documents in response to these requests. Rather, the SEC maintains that since internal investigations have closed, circumstances have changed to permit Plaintiff to resubmit these FOIA requests." He explained that "indeed, Plaintiff may file a new FOIA request, and if he does, 'he will stand in line behind other FOIA requesters.' This ensures that the agency need not follow 'an endlessly moving target.' However, if the agency unlawfully withheld documents in its prior responses, then the Court may have 'warrant' to place the requester at the 'head of the current [ ] FOIA queue.' In this case, the record is completely devoid of any evidence regarding the propriety of the SEC's prior withholdings. Therefore, in light of the specific circumstances of this case, the Court finds that the more appropriate remedy is to remand these ten requests for reprocessing." Turning to the use of Exemption 7(A), Magnuson indicated that the agency had to show that the records were compiled for law enforcement purposes and that disclosure could reasonably be expected to interfere with law enforcement proceedings. To show the latter, Magnuson noted, "the agency 'is not required to make a specific factual showing with respect to each withheld document that disclosure would actually interfere with a particular enforcement proceeding.' Rather, the Court must focus on 'the particular categories of documents, and the likelihood that the release of documents within those categories could reasonably be expected to threaten enforcement proceedings.'" He observed that "Plaintiff's argument that a categorical approach is improper is meritless. Numerous courts, including the Eighth Circuit, hold that the agency may utilize the categorical approach to justify its burden with regard to FOIA Exemption 7(A)." He noted that the categorical approach required the SEC to define functional categories, conduct a document-by-document review to assign documents to proper categories, and explain to the court how the release of each category would interfere with enforcement proceedings. He pointed out that the agency had divided the documents into five categories â€" documents produced by third parties, SEC correspondence with potential witnesses, testimony transcripts, attorney notes and trial preparation materials, and memoranda by SEC staff. SEC Insight argued that the categories were not functional but merely classified how the documents were obtained. Magnuson disagreed, noting that "after careful review of the record, the Court finds that the declarations submitted by the SEC provide [a] rational link [between the nature of the document and the alleged likely interference]. Each declaration specifies the category, the kinds of documents or records in that category, how those documents assist in the particular enforcement proceedings, and the likely interference that would result from disclosure of those documents. Thus, the declarations contain functional categories and explain to the Court the anticipated interference with pending enforcement proceedings." But Magnuson noted that "the declarations do not attest that document-by-document reviews were completed by the SEC, when categorizing the documents, as required." He added that "based on the record, the Court cannot conclude that [a document-by-document review] was conducted in this case, undermining the functionality of the categories and the relationship of the withheld documents to the purported enforcement proceedings. While the SEC does not need to present a Vaughn index to the Court, it nevertheless must attest to and assure the Court that it conducted a document-by-document review of responsive documents for categorization. The Court is not convinced that such analysis occurred in this case." SEC Insight argued that the disclosure of some documents, such as initial correspondence and subpoenas, would not interfere with enforcement proceedings. The agency, in response, claimed that once it had categorized the documents, no further segregation was needed. Magnuson disagreed with the agency, noting that "plainly, there is no declaration or affidavit that even, at a minimum, attests that the entirety of the documents are exempt, or that the non-exempt portions of the documents are inextricably intertwined with the exempt portions. The record is simply insufficient to allow the Court to determine whether the SEC has sustained its burden of reasonable segregability under the FOIA." Magnuson added in a footnote that "the express language of the statute requires that reasonably segregable portions of responsive materials not exempt must be disclosed, and the Court thus finds that the utilization of the categorical approach does not eliminate the agency's duty to determine segregability."
Issues: Determination - Glomar response

FOIA Project Annotation: A federal court in Minnesota has rejected the SEC's claim that to do a document-by-document review of records to ascertain the categories under which they fall for purposes of Exemption 7(A) (interference with law enforcement investigation or proceeding) would "monopolize SEC personnel and resources thereby significantly impeding ongoing enforcement proceedings." The agency told Judge Paul Magnuson that the files contained between hundreds of thousands to tens of millions of pages and review could take years to complete. Magnuson noted that "the Court does not question that review of the documents will require significant resources. Nevertheless, the Court questions how the SEC is able to assign the documents in proper categories without reviewing the documents. Moreover, Exemption 7(A) applies when disclosure of the documents would jeopardize enforcement proceedings. It does not obviate the requirement that an agency conduct a document-by-document review ï¿½" even if that review may require arduous efforts by the agency. The SEC must conduct a document-by-document review to discern whether documents or portions of the documents fall outside the functional categories." Magnuson rejected the agency's claim that there were no segregable records in the files, pointing out that "because the SEC has not reviewed the documents at issue, the Court is unable to determine what proportion of the information is exempt or nonexempt." Magnuson concluded that "the Court has merely required the SEC to show that release of categories of records [the plaintiff] seeks would interfere with its enforcement actions. Without requiring a review of each document, the Court would essentially provide the SEC with a blanket exemption for the records simply because they were compiled for law enforcement purposes. This contravenes clear congressional intent."
Issues: Exemption 7(A) - Categorical exemption

FOIA Project Annotation: A federal court in Minnesota has rejected the SEC's request that it allow the agency to file an interlocutory appeal to the Eighth Circuit concerning the district court's ruling that the agency must conduct a document-by-document review to determine what documents fit into which functional categories for purposes of Exemption 7(A) (interference with ongoing investigation or proceeding). Judge Paul Magnuson told the agency that his decision was not in conflict with In re Department of Justice, 999 F.2d 1302 (8th Cir. 1993), the circuit's precedent on Exemption 7(A) indexing, and added that other cases cited by the agency also did not conflict with his ruling. He then said the SEC had misinterpreted his ruling to mean that a document-by-document review for segregability was required under 7(A). He pointed out that "clearly, the SEC need not provide a particularized index of each document it withholds. Rather, it may create functional categories and withhold documents that fall within those categories. However, the SEC must conduct a document-by-document review to determine whether the documents contain reasonably segregable information that is non-exempt and therefore falls outside the functional categories. . .[T]he SEC fails to show that this issue is a controlling question of law for which there is a substantial difference of opinion." Magnuson also noted another contentious issue involved in the case ï¿½" who should bear the cost of the review. The SEC has claimed the cost of reviewing various investigatory files would cost $2 million and has suggested that John Gavin's company SEC Insight pay these costs as a commercial requester. However, since the agency had not raised this issue in its Motion for Reconsideration, Magnuson indicated he would not consider it at this time.
Issues: Exemption 7(A) - Categorical exemption

FOIA Project Annotation: A federal court in Minnesota has refused to grant several motions filed by the SEC after finding that the agency had filed its papers without prior approval of the court. In an FOIA case filed by John Gavin, the court noted that the agency's concerns about the cost of reviewing documents to determine what categories they fell into for purposes of Exemption 7(A) (interference with law enforcement investigation or proceedings) could be addressed later in the litigation. The court pointed out that "if the Court ultimately determines that Gavin must pay for the document-by-document review, it will order Gavin to do so. Finally, the Court finds that granting a stay would allow the SEC to evade FOIA requirements. Thus, denying the stay will serve the public interest in requiring agencies to make certain information available to the public and to establish an enforceable right of access to that information."
Issues: Exemption 7(A) - Categorical exemption

FOIA Project Annotation: A federal court in Minnesota has ruled that the SEC must continue to process a number of requests submitted by John Gavin for records pertaining to agency investigations. Gavin filed the case after the agency claimed that all the investigations were protected under Exemption 7(A) (interference with law enforcement investigation or proceeding). During the course of the litigation, the agency admitted that closed investigations no longer qualified for 7(A) protection and argued that Gavin should now resubmit those requests for processing. The court had found that the agency was required to provide a Vaughn index that divided the records into functional categories for purposes of 7(A) and rejected the agency's claim that it did not have to conduct a document-by-document review in order to justify the inclusion of records in the various functional categories. This time around, the agency argued that it was not required to perform a segregation analysis for records that were already categorized under 7(A). The agency based its argument on Judicial Watch v. Dept of Justice, 432 F.3d 166 (D.C. 2005), a case in which the D.C. Circuit said that if records were protected by the work product privilege there was no need to consider whether they could be redacted because they were completely protected by the nature of the privilege. The court noted that the agency wanted to take the case one step further, "arguing that once an investigatory document falls within a functional category, it is wholly exempt and no segregability review is necessary. The Court declines to leap that far. While the work-product doctrine may apply to the functional category of attorney notes and trial preparation materials, it does not necessarily apply to other functional categories, such as documents produced by third parties, SEC correspondence, testimony transcripts, and SEC memoranda. Such a broad application of Judicial Watch in this case would eviscerate the segregation requirement under Exemption 7(A)." The agency also argued that it was not required to conduct a document-by-document review until Gavin committed to paying any potential costs. The court pointed out that it "adamantly disapproves of the manner in which the SEC has conducted itself as it relates to Gavin's requests. The SEC has shirked its responsibility by brazenly refusing to conduct a document-by-document review ï¿½" despite a direct order from the Court. Moreover, it raises the cost issue as an after-the-fact argument to circumvent the requirements of FOIA. The SEC should have completed the document-by-document reviews from the outset before ever relying on Exemption 7(A). Instead, it arbitrarily relied on the Exemption without first determining whether the Exemption truly applies." Saying there was no evidence that Gavin had refused to pay potential costs, the court urged "the parties to pinpoint the scope of Gavin's requests to clarify the records he seeks. If Gavin agrees to pay the review costs associated with the defined requests, the SEC shall conduct the document-by-document reviews within sixty days of receipt of his payment." The court found that Gavin had constructively exhausted his remedies for requests that had been remanded after the investigation was closed. The court noted that "Gavin commenced this litigation after exhausting his administrative remedies. The SEC conducted an administrative review of his requests. If the Court required Gavin to exhaust his administrative remedies each time the SEC asserts a new exemption, two consequences would result. First, the SEC could evade the efficient, prompt, and full disclosure of information. Second, the SEC could indefinitely evade judicial review. The Court will not allow the SEC to circumvent its statutory obligations by ping-ponging from one exemption to another."
Issues: Exemption 7(A) - Interference with ongoing investigation

FOIA Project Annotation: A federal court in Minnesota has ruled that the SEC has finally shown that information pertaining to closed investigations of various companies is exempt under Exemption 7(A) (interference with ongoing investigation or proceeding), Exemption 2 (internal practices and procedures), Exemption 4 (confidential business information), Exemption 5 (privileges), Exemption 7(C) (invasion of privacy concerning law enforcement records) and Exemption 8 (financial examination records). The agency's victory comes after it ended its continued resistance to the court's order to review its original claims by submitting a document-by-document index to justify category-by-category exemption claims. Under Exemption 7(A), agencies are allowed to make categorical exemption claims, but the court may require the agency to substantiate those claims based on a document-by-document review. In response to 26 requests filed by John Gavin of SEC Insight for records concerning various investigations, the agency originally asserted a Glomar response neither confirming nor denying the existence of the investigations. When the court rejected that defense, the agency continued to claim 7(A) and refused to provide any significant detail. The court then ordered the agency to conduct a document-by-document review and ordered Gavin to pay for the review. As a result, Gavin narrowed his request and the agency conducted a document-by-document review of the remaining open investigations; as investigations were closed, Exemption 7(A) no longer applied and those requests were processed subject to other FOIA exemptions. This time, Judge Paul Magnuson found the agency had abided by his previous instructions concerning Exemption 7(A) as it pertained to those investigations that remained open. Although Gavin argued its affidavits were conclusory, Magnuson noted that "to the contrary, the initial and supplemental declarations of the SEC attorneys specifically explain how the release of documents in each functional category will interfere with pending law enforcement proceedings, that the document-by-document review revealed that each document fell within a functional category identified in the declarations, and either that no document contained information that could be segregated and released without risking interference with ongoing enforcement proceedings or that reasonably segregable, non-exempt information existed and would be released." Magnuson agreed that Exemption 2 covered names of staff members, pointing out that "merely knowing that a particular staff member was assigned to an investigation provides no indication as to what the staff member did on the investigation or how much time was devoted to the investigation. The redacted information is purely trivial, administrative information to which Exemption 2 applies." Magnuson found that some information would cause competitive harm under Exemption 4 and that other voluntarily submitted information was confidential and not customarily disclosed to the public. In reaching its conclusion on voluntarily submitted information, he relied on the standard in Critical Mass even though the Eighth Circuit has not yet accepted that standard. Magnuson agreed that much of the information was protected by Exemption 5, noting that "SEC attorneys prepared these documents in the course of active investigations focusing on specific actions and possible securities law violations. The documents also contain reports and recommendations with respect to the status of an ongoing investigation. As such, the documents were prepared in anticipation of litigation and qualify as attorney work product." When Gavin attacked the invocation of Exemption 8 by arguing that the segregable information could be disclosed, Magnuson indicated that "the documents were produced in connection with an ongoing SEC examination or investigation and provide insight into the information and entities the SEC attorneys were examining and investigating. As such, the documents fall within the scope of Exemption 8." Magnuson found Gavin had substantially prevailed by filing suit, noting that "Gavin's vigorous and persistent prosecution of the action ï¿½" not the mere passage of time ï¿½" forced the SEC to release the documents and comply with FOIA." Nonetheless, he then decided there was no public interest in disclosure and that Gavin had a strong commercial and personal interest in the records that weighed against an award of attorney's fees. He also rejected Gavin's claim for sanctions, pointing out that, although he had "expressed great frustration with the SEC's litigation tactics in this action," the agency's behavior was "neither clearly unreasonable nor vexatious."
Issues: Exemption 7(A) - Interference with ongoing investigation, Exemption 7(A) - Categorical exemption

SUMMONS Returned Executed by J. Patrick Gavin. United States Securities and Exchange Commission served through Assistant U.S. Attorney Thomas Heffelfinger on 10/20/2004, answer due 12/19/2004. (LJD) (Entered: 11/17/2004)

2004-11-19

4

MOTION for Admission Pro Hac Vice for Kathleen Cody by United States Securities and Exchange Commission. (Sekus, Perry) (Entered: 11/19/2004)

TEXT ONLY ENTRY - ORDER granting 4 5 Motions for Admission Pro Hac Vice of U.S. Government attorneys Kathleen Cody and Donna S McCaffrey for United States Securities and Exchange Commission. Approved by Clerk Richard D Sletten on 11/19/04. (MMC) (Entered: 11/19/2004)

2004-11-22

6

ANSWER to Complaint by United States Securities and Exchange Commission.(Sekus, Perry) (Entered: 11/22/2004)

2004-11-22

7

CERTIFICATE OF SERVICE by United States Securities and Exchange Commission re 6 Answer to Complaint (Sekus, Perry) (Entered: 11/22/2004)

2004-12-01

8

Return of Service Executed for Summons and Complaint served on General Counsel on 11/20/04., filed by J. Patrick Gavin. Summons Returned Executed already filed on 11/12/04 re 3 . (LJD) (Entered: 12/01/2004)

TEXT ENTRY ONLY-CLERK'S NOTICE OF REASSIGNMENT OF MAGISTRATE JUDGE. The Clerk of Court is directed to reassign the Magistrate Judge in this case. Case is reassigned to Magistrate Judge Janie S Mayeron for all further proceedings. In addition, any proceedings currently scheduled before the transferring Magistrate Judge will proceed in front of that Judge, unless directed otherwise. If you have questions regarding this assignment, please direct your inquiries to Katie Haagenson at #651-848-1190. Please note: the new case number is 04-cv-4522 PAM/JSM. Please use this case number on your pleadings. Chief Magistrate Judge Raymond L Erickson no longer assigned to case. Signed by Clerk Richard D Sletten on 9/29/05. (SJH) (Entered: 09/29/2005)

ORDER: Defendant's Motion for Summary Judgement 15 is GRANTED IN PART and DENIED IN PART: Count 4 of the Complaint is DISMISSED and Count 6 is DISMISSED in part; Counts 2,3,5,6 (the 7(A) portion), 8,9,10,17,19,20 are REMANDED to the SEC for reprocessing; The SEC must submit detailed affidavits addressing the deficiencies identified by the Court by January 1, 2006: i. If appropriate, the parties may renew their motions for summary judgment and file briefs in support by February 1, 2006. ii. Opposition papers are due February 20, 2006. iii. Replies are due March 1, 2006. These renewed motions will be decided without oral argument; Plaintiff's Motions for Summary Judgment [37, 41] are DENIED. (Written Opinion). Signed by Judge Paul A. Magnuson on 10/22/05.(jmf) (Entered: 10/24/2005)

ORDER - this matter is before the Court on Pltf's informal request to extend filing deadlines. The Court finds the request is reasonable. IT IS HEREBY ORDERED that the deadlines are extended as set forth in this order. The renewed motions will be decided without oral argument. Signed by Judge Paul A Magnuson on January 30, 2006. (smr) (Entered: 01/31/2006)

ORDER denying 60 MOTION for Leave to Appeal and for Stay filed by United States Securities and Exchange Commission, (Written Opinion). Signed by Judge Paul A. Magnuson on 03/15/06. (jmf) (Entered: 03/15/2006)

2006-03-17

62

MOTION Clarification by United States Securities and Exchange Commission. (McCaffrey, Donna) (Entered: 03/17/2006)

2006-03-24

63

NOTICE OF APPEAL TO 8TH CIRCUIT by United States Securities and Exchange Commission. (Attachments: # 1 COA - Form A Appeal Information Form)(McCaffrey, Donna) (Entered: 03/24/2006)

Transmission of Notice of Appeal and Docket Sheet to US Court of Appeals re 63 Notice of Appeal to 8th Circuit. Delivered/mailed two certified and one uncertified copy of each of the following to the Court of Appeals: St. Paul Office: Notice of Appeal, Order, Judgment and District Court's Docket Sheet. (JMH) (Entered: 03/27/2006)

MOTION for Summary Judgment Memorandum of Law by United States Securities and Exchange Commission. (McCaffrey, Donna) (Entered: 07/07/2006)

2006-07-07

97

CERTIFICATE OF SERVICE by United States Securities and Exchange Commission of Notice; Renewed Motion for Summary Judgment and/or Motion to Dismiss; and Supporting Memorandum of Law (incl. Cert. of Compliance with Word Count) (McCaffrey, Donna) (Entered: 07/07/2006)

Exhibit List to Defendant's Memorandum of Law in Opposition to Plaintiff's Renewed Motion for Summary Judgment by United States Securities and Exchange Commission. (McCaffrey, Donna) (Entered: 07/27/2006)

2006-07-27

105

CERTIFICATE OF SERVICE by United States Securities and Exchange Commission (McCaffrey, Donna) (Entered: 07/27/2006)

2006-08-01

106

USCA JUDGMENT as to 63 Notice of Appeal to 8th Circuit filed by United States Securities and Exchange Commission; the appeal is dismissed. (LPH) (Entered: 08/02/2006)

Exhibit List for Reply Memorandum of Law In Support of Renewed Motion for Summary Judgment and/or Motion to Dismiss by United States Securities and Exchange Commission. (McCaffrey, Donna) (Entered: 08/07/2006)

2006-08-07

109

CERTIFICATE OF SERVICE by United States Securities and Exchange Commission re 108 Exhibit List, 107 Reply, (McCaffrey, Donna) (Entered: 08/07/2006)

2006-08-07

110

DOCUMENT FILED IN ERROR- DUPLICATE ENTRY//Exhibit List for Reply Memorandum of Law in Support of Renewed Motion for Summary Judgment and/or Motion to Dismiss by United States Securities and Exchange Commission. (McCaffrey, Donna) Modified on 8/16/2006 (lph). (Entered: 08/07/2006)

Certified Copy of USCA JUDGMENT as to 63 Notice of Appeal to 8th Circuit filed by United States Securities and Exchange Commission. The motion of appellee for dismissal of this appeal is granted. The appeal is hereby dismissed. (akl) (Entered: 08/21/2006)

2006-08-23

120

MEMORANDUM in Opposition re 114 MOTION for Sanctions and Attorney's Fees (Including Certificate of Compliance with word count) filed by United States Securities and Exchange Commission. (McCaffrey, Donna) (Entered: 08/23/2006)

2006-08-23

121

CERTIFICATE OF SERVICE by United States Securities and Exchange Commission re 120 Memorandum in Opposition to Motion for Sanctions and Attorney's Fees (McCaffrey, Donna) (Entered: 08/23/2006)

ORDER: Gavin's Motion to Deny Request for Review Costs (Docket No. 65) is DENIED; Gavin's renewed Motion for Summary Judgment, In Camera Review, and Appointment of a Special Master (Docket No. 80) is DENIED; The SEC's renewed Motion for Summary Judgment (Docket No. 94) is GRANTED in part and DENIED in part; Counts 1, 7, 13, and 22 of the Complaint are DISMISSED with prejudice; The parties shall confer within thirty days of this Order to determine whether Gavin is willing and able to pay for the review costs associated with his requests identified in Counts 11, 14, 15, 23, and 26. If Gavin agrees to pay the review costs associated with the defined requests, the SEC shall conduct the document-by-document reviews within ninety days of receipt of his payment; and, SEC shall file a Vaughn index relating to the remanded requests (Counts 2, 3, 5, 6, 8, 9, 10, 12, 16, 17, 18, 19, 20, 21, 24, and 25) within thirty days of this Order. (Written Opinion). Signed by Judge Paul A. Magnuson on 10/13/06.(jmf) (Entered: 10/16/2006)

NOTICE by United States Securities and Exchange Commission re 124 Order on Motion for Miscellaneous Relief,, Order on Motion for Summary Judgment, (McCaffrey, Donna) Modified on 4/3/2007 (jam). (Entered: 04/02/2007)

ORDER:The parties shall file their renewed summary judgment motions, as well as all supporting memoranda and evidence, by June 5, 2007; Opposition memoranda are due July 17, 2007; and Reply memoranda are due August 1, 2007. The renewed motions will be decided without oral argument. (Written Opinion). Signed by Judge Paul A. Magnuson on 04/30/07. (jmf) (Entered: 04/30/2007)

CERTIFICATE OF SERVICE by United States Securities and Exchange Commission re 150 Declaration in Support,,, 149 Memorandum in Support of Motion, 147 MOTION for Summary Judgment Renewed , 148 Notice of Hearing on Motion (McCaffrey, Donna) (Entered: 06/05/2007)